CONSUL GENERAL VIIT TO THE PORT CITY OF SANTOS

UNCLAS SECTION 01 OF 05 SAO PAULO 000161

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E.O 12958: N/A
TAGS: EWWT EINV ETRD ECON ELTNSNAR SENV OEXP BR
SUBJECT: CONSUL GENERAL VIIT TO THE PORT CITY OF SANTOS

REF: A) 05 SAO PAUO 1106; B) 05 SAO PAULO 703;

C) 05 SAO PAUL 614

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SENSITIVE BUT UNCLASSIFIED; PLEASE PROTECTACCORDINGLY

SUMMARY
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1. (U) ConsulGeneral (CG) and Econoff recently visited the port
city of Santos, which lies 60 kilometers southwes of Sao Paulo
across the Serra do Mar mountain rnge. Santos serves the
industrial and agricultual trade needs of Sao Paulo and neighboring
stats and is the most active port by volume shipped inSouth
America. The visit offered an opportunity for the CG to tour the
Department of Homeland Secrity (DHS) offices and obtain from the
staff an ssessment of the Container Security Initiative (CS)
program, which has been operating since Septemer 2005. He also
visited the U.S.-Brazil bi-national center to meet with students and
a talented nd committed former Youth Ambassador; met with theMayor
of Santos, who is focused on creating oppotunities for growth and
investment in Santos; an toured the operations of Archer Daniels
Midland (ADM),one of the four largest agricultural processrs in
Brazil. The day ended with a visit to DowChemical's Corporate
Social Responsibility (CSR)Clean Mangrove Project, which has
restored some f the sensitive mangrove ecosystems along the banks
of the Santo Amaro River. The visit offered a god opportunity to
advance our public diplomacy aenda in the key city, as well as to
recognize eforts of those involved in the highly successful jont
U.S./Brazilian CSI program. The CG also gave interviews to the
local media. End Summary.

TE CITY OF SANTOS
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2. (U) Sntos, a coastal city in Sao Paulo state founded in1546,
is partially located on the island of Sao icente and partially on
the mainland. It is an attractive beach resort that hosts many
tourists on weekends. As of 2006, Santos had an estimated
population of 418,375 people. Santos is also home to the soccer team
made famous by the Brazilian sports superstar Pele. It is the
largest seaport in Latin America, having traded over 72 million tons
of goods in 2006. The city has large industrial complexes and
shipping centers which handle a large portion of the world's coffee
exports and a number of other Brazilian exports as well, including
steel, oil, cars, oranges, bananas, cotton, and grains. According
to the Guinness Book of Records, the city features the world's
largest beach-front garden at 5.335 kilometers in length.

CSI: MAINTAINING SECURE CARGO
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3. (U) The Department of Homeland Security (DHS) Container Security
Initiative (CSI) is housed in the historic Customs Building in
downtown Santos The CG visited their offices to first receive an
assessment of the project from both the DHS employees and their
Brazilian counterparts. On September 22, 2005 (ref A),CSI Santos
became the first fully operational CSI port in South America, which
enables cargo destined for the U.S. through the port to be
pre-screened. The primary mission of CSI is to enhance global
container security from the threat posed by terrorism. All involved
in the project were happy with the results and described good
cooperation between Brazilian port and Customs authorities and U.S.
DHS agents. They stated that the presence of CSI serves as a
deterrent to fraud, both physically through the presence of the
agents scanning the containers, and psychologically because of the
mere knowledge of its existence at the port. The efficiency of CSI
has improved the export of containers and is both an economical and

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psychological benefit for companies exporting. With 90 percent of
Brazilian container cargo exiting out of Santos, it is important to
maintain security in the shipments. The main challenge facing the
team today is to enhance the communications system that monitors the
containers, allowing for a real-time online system (with restricted
access) that facilitates inspection of the containers. The general
consensus after almost a year and a half is that CSI has been a good
addition to port security, and has been a "win - win" situation for
both Brazil and the U.S.


4. (U) The CG handed out awards to the 21 Brazilians associated
with the CSI project, including the Superintendent of the Federal
Revenue Service and the Chief Inspector and Deputy Inspector of
Santos Port. It was a good opportunity to recognize the valuable
support of the Brazilians and to foster continued support,
coordination and collaboration.


MAYOR OF SANTOS: STILL POPULAR AND PRODUCTIVE
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5. (U) The CG met with the very popular Mayor of Santos Joao Paulo
Tavares Papa (Brazilian Democratic Movement Party - PMDB),who was
sworn in as mayor on January 1, 2005 following a close election that
he won by a margin of just over half a percentage point. Papa, an
engineer who has served in several municipal positions and as Vice
Mayor, highlighted his future plans for the growth of the city. He
emphasized the importance of the port, which is directly and
indirectly responsible for 70 percent of the economic activity of
the city. He is currently involved in negotiations on two big
projects (with outside partners) to enlarge the port, which would
triple the actual capacity that is currently managed by the
state-owned Sao Paulo State Docks Company (CODESP). He also outlined
plans for the revitalization of the old port, making it a center for
tourism, recreational and sports activities, and a boat marina. The
GoB has transferred authority of this area to the city, which plans
to renovate old warehouses and fund new construction to create a
second passenger terminal for arriving cruise ships. Mayor Papa
mentioned that the GoB's recently announced Growth Acceleration
Program (PAC),which has a special section on ports, looks to
provide incentives and investment opportunities for specific Santos
port projects. Finally, he mentioned the desire to operate a
passenger train between Sao Paulo and Santos to transport tourists
and workers rapidly between the two cities.


6. (U) According to Papa, the economy of the city is based on 1)
the port, 2) services, 3) tourism, and 4) universities. Thirty
percent of the population is of retirement age, and with five
universities, there is also a large student population. As a
result, health standards are a major priority for the community.
Fortunately, Santos has a good health system and a safe environment.
The challenge he sees is to maintain the high quality of life,
foster economic growth, and to find physical space for future
business investment and port expansion. Santos is limited by
surrounding communities and the ocean, with little room for growth;
hence the need for creative use of existing space for development.
In October 2006, light crude oil was discovered off the coast, which
has generated a USD 18 billion Petrobras investment in the region.
Last year, a Santos delegation visited Long Beach, and his desire is
that Santos form a sister city relationship with a U.S. city.
(Note: PAS will work with this Mayor's office to facilitate contacts
towards establishing a sister city relationship with an appropriate
U.S. city. End Note).

THE BI-NATIONAL CENTER: PROMOTING LANGUAGE AND CULTURE
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7. (U) At the U.S.-Brazil Bi-National Center (CCBEU),CG and
Econoff toured the facility, talked with staff about the language
and cultural programs offered by the Center, and solicited ideas
regarding Consulate assistance for the Center. Approximately 25
English-language students met with the CG. It was an opportunity to
ask questions about the U.S., about the U.S. Consulate in Sao Paulo,
and requirements for study in the U.S. - F1 and J1 visas. We were
joined by Alan Martino, who visited the United States as a Youth
Ambassador in 2005. Martino is currently teaching English to the
elderly in a city-run program while applying for college in the U.S.
under the auspices of the U.S. Achievers Program (USAP). USAP
provides college funding for bright, talented but economically
disadvantaged youths who want to pursue academic excellence.


8. (U) CCBEU was founded in 1943 and today has a student body of
1,500 students, with capacity for 5,000. The President, Joao
Borges, stressed that the purpose of CCBEU is to make a connection
with the community by teaching English language and culture, which
is a very different perspective from other language schools in the
city. Eighty percent of the students at CCBEU are on some type of
scholarship; the Center also receives some support in the form of
partnerships with U.S. companies in the region. CCBEU has strong
ties with the Rotary Club and receives all Rotary exchange students.
CCBEU has a strong counseling section and hopes through cultural
and educational exchange programs and student involvement in
administration tasks, to develop future leaders in the community.
Borges pointed to Alan Martino as a good example of community youth,
stating that since his return from the U.S., he continues to
volunteer as a teacher, participate in community activities, and
serve on the CCBEU Board. CCBEU requested assistance from the U.S.
Consulate with speakers or cultural events programming in order to
attract a larger audience from the community. CCBEU has 54
employees, 25 of whom are teachers, in their large facility housing
a 140-seat auditorium, a 21,000 volume library, a computer lab, and
a large art gallery housing their permanent collection. At the end
of the CCBEU event, the CG gave an interview to the local media,
which covered various bilateral issues.

ADM: GOOD NEWS FOR AGRICULTURE
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9. (SBU) Archer Daniels Midland (ADM),one of the largest
agricultural processors in the world, has facilities in the Santos
port. During the Ambassador's visit in 2005 (ref B),ADM's Director
of Port Operations complained of infrastructure-related problems
associated with the depth of the port; the slowness on the part of
CODESP to complete a planned port-dredging operation; the lack of a
sufficient parking area for vehicles; and insufficient train cars to
load and unload grains. The news this time around was much better.
According to Bert Frost, ADM Director for
Ports/Logistics/Fertilizer, the company is enjoying good operations
and profits. ADM presently has two supply points to the world:
Brazil and the U.S. According to Frost, Brazil is back in the
market, is competitive and growing; thus, ADM will continue to
invest in this region. A bumper soy crop is projected for this year
following the near-drought conditions of the last two years. Frost
estimated that ADM moves 10-12 million tons of soybeans per year
through the Santos port. ADM exports soybeans, soybean meal, sugar,
corn and sorghum, and imports wheat and barley. Of the company's
26,000 employees worldwide, 2,000 are located in Brazil.


10. (SBU) ADM is not only one of the largest agricultural
processors in Brazil, but is also a large transport company, with
barges, rail cars, and trucks to move its product from the farm to
the transport facility for export. ADM transports grain from Mato
Grosso, Goias, Parana, and Mato Grosso do Sul states, working
closely with farmers in these regions and providing loans to farmers

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(with the farm as collateral) as needed. ADM wants to be a
responsible company in terms of sustainable development and the
environment, and for that reason has chosen not to farm or accept
grain from the Amazon. Per Frost, ADM's business runs on logistics,
and ADM has a strong transport chain in place to bring its
agricultural products quickly from the farmer's fields to the port
for shipment. ADM owns two barge companies, rail cars, and has
three rail receiving areas and four truck platforms for receiving
cargo. Four large sheds can accommodate up to 190,000 metric tons
of grain. However, the one negative point is the rising cost of
transporting their product from the field to the port. The cost in
Brazil of transporting product to port is double the cost in the
United States for the same distance due to poor logistics and
infrastructure. Frost labeled this the "custo Brasil", or the cost
of doing business in Brazil, and stated that this extra cost is
borne by the farmer. However, even with this added cost, ADM posted
worldwide revenues of USD 35 billion in 2005; of that, 3 billion was
generated by ADM South America, of which USD 2 billion came from
Brazil.

DOW CHEMICAL'S CLEAN MANGROVE PROJECT:
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CLOSE COMMUNITY TIES
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11. (U) The final visit of the day took place at Dow Chemical's
impressive Corporate Social Responsibility (CSR) project, the Clean
Mangrove Program. Since 2002, this program has developed various
initiatives to protect the existing mangrove area inside the Dow
property in Guaruja, the neighboring city and beach resort
immediately across the harbor from Santos. In coordination with the
Responsible Care Community Advisory Panel (CAP) - a 28-member panel
composed of concerned community members, teachers, NGOs, and the
local Minister of Tourism - Dow has mobilized the surrounding
communities to work together to increase awareness of the mangrove
area along the Santo Amaro River. Dow occupies 360,000 square
meters of their 800,000 square-meter property, of which 50 percent
is mangroves. The Clean Mangrove Project has encompassed various
phases: 1) startup in 2002; 2) partnership with local university
UNISANTA in 2003 for scientific research and study of the mangrove
area; 3) cleanup and community awareness activities from 2003 -
2006; 4) construction of the mangrove project from 2004 - 2007; and
5) a proposed book on mangroves and partnership between CAP and
UNISANTA in 2007. The fourth phase of the mangrove project includes
a museum, larviculture stations, a tree-breeding area, an
auditorium, and a visitor platform.


12. (U) For this year, Dow, the Community Advisory Panel and the
Ocean Future Society (Jean-Michel Cousteau's organization) have
created the Ambassadors of the Environment program, which will bring
60 students from fifth to eighth grade to Guaruja for one week of
training and working with the Clean Mangrove Program. (Comment: It
is impressive that not only the community and Dow are involved, but
have received international recognition from a world-renowned
organization. CG suggested that the Smithsonian Tropical Research
Institute (STRI) in Panama, which has done extensive research on
mangroves, might be able to provide research materials and/or
speakers to assist with this project. ECON will facilitate contact
with STRI to assist with further mangrove research, possible future
contacts, and guest speakers. End Comment.)


13. (U) Dow Chemical has been in the Guaruja area since 1971, with
a total of 368 employees located in two locations. There are six
specialized production plants, manufacturing epoxy, polyol &
polyglycol, latex, wire & cable, polystyrene and polyethylene.
Forty-five percent of Dow Brazil's revenue is invoiced through the
Guaruja facility. Total sales for Dow worldwide were USD 50

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billion, with Brazil accounting for USD 5 billion. The Guaruja
facility boasts one of the best safety records for Dow worldwide.
In a subsequent interview a week later at the Consulate General,
Neil Hawkins, VP for Global Advocacy & Public Policy, voiced Dow's
commitment to remain here in Brazil, and added that Dow is poised to
begin manufacturing products from renewable feed stocks. Dow has
the technological expertise to produce commercially viable products
using renewable materials. For example, Dow presently processes soy
beans to make foam for car seats and mattresses. Per Hawkins, with
the climate changes in the next 50 years, Brazil has the potential
to be a "heartland of biomaterials," providing the raw renewable
materials for Dow's future production needs.


14. (U) The one concern Hawkins voiced is the rising taxation
(federal, state) on the price consumers pay for electricity (in this
case, industrial electricity),which has tripled in the last 5
years. If these tax increases continue, Dow will convert from a
cost advantage status to a cost disadvantage status for certain
products, which would impact on Dow's competitiveness and create
disincentives to future investment. Dow has formed a coalition with
other similarly affected associations (steel, aluminum, chemical) to
talk with GoB officials (most recently, Chief of Staff Dilma
Rouseff) in an attempt to stave off further tax increases. He
stated that if their attempts do not provide any relief in the near
future, he will contact the Consulate for possible assistance on
their behalf. (Note: Mr. Lucelio de Moraes, Government Affairs
Director for Dow Brazil was contacted by Econoff on February 16, and
stated that he would shortly request the Consulate's assistance in
convening a meeting with ABRACE, the Brazilian Association of Energy
Consumers, to discuss the issue. End Note.)

SANTOS: OPPORTUNITIES FOR U.S.- BRAZIL COOPERATION
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15. (U) Comment: The city of Santos is home to the most
significant port in South America, one of two CSI locations in South
America, and an active bi-national center that teaches 1500
students. It is a thriving community to which tourists flock on
weekends, has a large student population with five universities, and
is economically stable with retirees making up approximately 30
percent of the population. Pele, the internationally known
superstar, put the name Santos on the map when he played for the
local soccer team during the 1960s. The Mayor is focused on
generating investment in the city and is pushing several major
infrastructure projects. The city and its port have attracted
large multinational companies such as ADM and Dow Chemicals, which
besides generating local jobs are concerned about and active in the
community. Dow's Clean Mangrove Program by Dow is a great example
of a CSR program that involves and motivates the surrounding
community. In addition to striving for growth and investment in the
region, the local government is also actively engaged in improving
the quality of life of its citizens and residents. Santos is a
community the U.S can and should work with more; to this end, the
Consulate plans to enhance its public diplomacy and commercial
outreach with key partners in Santos. End Comment.


16. (U) This cable was coordinated with Embassy Brasilia.

MCMULLEN